Hello all, welcome again to my blog concerning Real Estate. This round we're going to take a little break on Distressed properties (Short Sales, bank REO's, etc.) and get a lil more in depth on options one can do to provide opportunities in the current situation.

If anyone else is paying attention to the MLS you'll see that the MLS numbers are geometrically climbing up the ranks. 297XXXX just kind of snuck up, and it seems like within a week, we'll be breaking the 298XXXX numbers. A lot of them are Bank REO properties,

cause they are moving to clear the books. . . Realization has been made that these properties are weighing us down and foreclosures are happening more frequently. A lot of the lenders are just trying to dump their REO's to salvage their losses. What does this mean??? A LOT more REO properties, and these are fantastic deals... *as I said in my previous blog*

Now, what do all these REO's and Short sales have to do with someone already in a home, in a market that is not moving, or not being very kind to a lot of the non distressed sellers?? (Kind of sad... the REO's and Short Sales have flooded so much, the people who have stayed out of default, current with payments and pride in ownership do not get to enjoy their right to sell their property. Kind of like a pyhrric victory and its unfortunate... but it doesn't have to be this way...

For Examples sake, lets say that a family buys a *all the preceding examples are completely arbitrary. that means I made them up* 2000 sq. foot house 3 years ago for $275,000. nice prestigious neighborhood... Well, now that nice neighborhood has been hit with foreclosure, and distressed sales are becoming numerous... Not a big deal right... well that problem with that is a lot of evaluating of value *now for the record, I do NOT give appraisal... I can give a CMA, but I AM NOT AN APPRAISER... Call Tim Barber *google him* if you want to hack out some appraising issues* back to evaluating value, they are based on Comparable properties. Comps as they are commonly called. Well for a while, Bank REO sales and Short Sales were not included when evaluating value... well, now the problem is a large portion of the comps in an area are mostly distressed sales. This puts a huge wrench in the works when it comes to accurately pricing a home. So now the problem is when it comes to selling that 275,000 house, Short Sales and bank REO's have been selling in this fantasy neighborhood have been coming in at around 200,000... Well, what does this mean for the family with the 275,000 who wants to sell? Well it won't happen. for arguments sake let's say they keep current with all payments and have knocked down their principal only a little bit *ah the nice reality of financing*. So they owe something like 267,000 on their home. Well now the increasing REO's and Short Sales have driven the comp pricing to around 200,000. Now they can't sell the house for as much as they even owe! And now that they have stayed current on their payments, they are not allowed to Short Sale the house to get out of it... *Also not to mention, why should they have to get weaseled out of the appreciation that the house should have?* means they're stuck in what they have ... right? Well not exactly...

This is a great oppoturnity to move up!!! and keep around the same payments; Let's break it down like this... the 275,000 house has had the same mortgage for the whole time the family had it. they were obviously comfortable paying it cause they didn't go into default, so they are in good shape when it comes to covering the mortgage. Well, now 275,000 gets you a way nicer home, if YOU go hunting for an REO or short sale. So what's to say that they couldn't ideally find DOUBLE the home for the same price they paid 3 years ago? 4,000 sq. feet for 275,000 now (this is super far fetched... they might have to do some cosmetic work to it or something, but HEY!!! 2000 extra square feet... the only downside to that is your AC bill... that's small potatoes!). Well, ok, but what about our current house? here's the big kicker... RENT IT!!! that's right, get some tenants in there!

The market has changed A LOT of things... one of them is loan restrictions; they are very strict now *banks HATE risk, and the subprime meltdown nailed everyone in the short hairs. . . cause they weren't cautious enough of the risks. They saw the gold in the horizon and not the river of lava they have to cross to get to that gold.* So loans are harder to get. What about all the people that foreclosed?? THEY NEED A PLACE TO LIVE TOO... they aren't just going to stay with Aunt Gertrude in her 2 bedroom shack are they? So look at the number of renters out there... There are plenty of people, with good income, and a definite need for a home who may have had some trouble along the way and have a nicew blackmark on their credit. Well while they repair their credit, they need somewhere to live right? Aunt Gertrude's feet smell terrible, and her naked soap opera watching ritual just isn't working for your 8 and 9 year old children. THEY NEED OUT OF HER HOUSE... What's the moral of all this banter? These people need a place, so they HAVE to rent. That's where your current primary residence comes in... PUT some tenants in there! Go chase that huge house!!! sign your people up in a 2 year lease. . . wait for the market to turn around. The people in your house... what the hey, be nice, make them pay only the mortgage you have to cover, so nothing comes out of your pocket... You hang on to your old house for a little while, while all the shenanagans that is our current market blows over and you have your nice, new double the size of your old home, you get to make your NEW home... so let's RECAP... You keep the same payment *Cause the house is the same amount of money*, you get MORE house. . . You have tenants in place on your old house, so you're not losing any money. . . they are keeping your mortgage afloat... and for roughly the same price a month, you have more house... Oh there is more don't worry... What happens when the market turns around, and your old house for 275,000 is now worth 350,000??? hmm, who hates putting roughly 75,000 into their pockets (LESS, cause more than likely you have some closing costs, and commissions to pay) but ideally you get paid!!! so now you just cleared over 60,000, all the while you got your new home, for the SAME payment... think about it this way, you got paid 60,000 to live in a house double the size of the one you had, and your payments stayed the same... So... if your old house went up, who knows what your new house. . . *That has double the features and amentities, and lot size and square footage of your old home* what is that going to be worth...? You see where im going with this???

OK... that sounds about good. Now to address these horror stories of Real Estate, i've been giving them some thought, and I wonder if anyone is even reading these blogs. . . I know they are extremely informative and cover short sales and bank REO's and advancing your Real Estate education *im laying it on thick huh?* but is anyone even interested in hearing about someone getting left out to the wolves... YOU DECIDE!! EMAIL me and let me know if you want to hear something like that... As for now, im going to put the bookmark here for now, and pick up the struggle another day *Soon! constant updates are a beautiful thing.* Im going to try somethin else new...

IF YOU READ THIS BLOG AND LIKED IT; PLEASE, EMAIL ME AND LET ME KNOW WHAT YOU WOULD LIKE THE NEXT TOPIC TO BE ABOUT. I promise to make a dilligent effort to cover any topic you give *I would prefer it stay about REAL ESTATE seeing as how that is my profession, but I will make an attempt on anything requested.* OK

Thank you for reading this blog, and please as I say again... GIVE FEEDBACK!!! ask questions; you know the score.

There are no foolish questions; It is only foolish to NOT ask questions!

Thank you for readin this and I look forward to speaking with everyone soon... best wishes 

Jason Caballero
Dan Schwartz Realty, Inc.
Mobile: (520)250-6369
Office: (602)274-8322
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